Navigating the Ocean Shipping Reform Act, Part One: The Overview

February 7, 2023

On June 16, 2022, President Joe Biden signed the Ocean Shipping Reform Act of 2022 (OSRA). OSRA’s objective is to reduce shipping costs and address concerns relating to supply-chain challenges. OSRA provides the Federal Maritime Commission (FMC) with more authority to address specific issues impacting supply chains. In addition, OSRA is a springboard for additional initiatives for the FMC to implement through the rulemaking process.

OSRA primarily targets the costs and complications surrounding detention and demurrage. Beneficial cargo owners (BCOs) face substantial costs when both ocean carriers and marine terminals assess detention and demurrage, yet they receive minimal documentation. In particular, retail and manufacturing BCOs have asked for billing transparency with predictable reporting requirements. Of note, they have reported receiving bills for charges that could not be avoided and were outside of their control, citing examples of chassis unavailability at terminals, bills arriving months after a container is returned, and an overall lack of uniformity among detention and demurrage charges, especially during the pandemic.

With the passage of OSRA, ocean common carriers must now comply with certain billing practices, or risk nullification of the detention and demurrage charges they can assess. To create transparency to the shipping community, OSRA requires any party seeking to recover demurrage and detention to provide specific information in invoices for demurrage and detention. The required information means carriers must clearly document the charges, and failure to do so will eliminate a BCO’s obligation to pay the applicable charges.

BCOs also faced significant delays and costs associated with challenging detention and demurrage charges. Now, shippers can submit information concerning the charges assessed by ocean common carriers to the FMC. These “charge complaints” require the FMC to conduct a prompt investigation and shift the burden of establishing the reasonableness of a demurrage or detention charge to the ocean common carrier. If the FMC determines the charge is noncompliant, it must promptly order a refund of the charges paid and impose a civil penalty.

In addition, BCOs complained they faced retaliation from ocean common carriers, for example, through refusing to honor negotiated service agreements or enter into new agreements.

Consequently, OSRA includes an express prohibition on retaliation and other discriminatory actions to protect shippers. Specifically, an ocean common carrier, marine terminal operator or ocean transportation intermediary may not retaliate against “a shipper, an agent of a shipper, an ocean transportation intermediary, or a motor carrier by refusing, or threatening to refuse, an otherwise-available cargo space accommodation,” and may not resort “to any other unfair or unjustly discriminatory action” if the shipper patronizes another carrier or if the shipper files a complaint with the FMC.

OSRA recognizes that the supply-chain issues go beyond billing practices and shipper complaints. Terminal congestion and equipment availability create unpredictability, in terms of cost and timing, for BCOs. OSRA requires the commission of a study to develop best practices for on-terminal or near-terminal chassis pools. It also requires the FMC to develop rules to define when a carrier can refuse to deal or negotiate with respect to vessel space.

OSRA also authorizes the FMC to issue an emergency order requiring any ocean common carrier or marine terminal operator to share information directly with shippers, rail carriers or motor carriers relating to cargo throughput and availability when there is a determination that “the congestion of carriage of goods has created an emergency situation of a magnitude such that there exists a substantial, adverse effect on the competitiveness and reliability of the international ocean transportation supply system.” The objective is to create a transparent relationship among all components of the supply chain.

Finally, the FMC has created a website updating the public with all FMC actions taken in the wake of OSRA. 

For further insights on this topic, see Navigating the Ocean Shipping Reform Act, Part Two: New Rules and Big Changes and Navigating the Ocean Shipping Reform Act, Part Three: Litigation and Rough Waters Ahead.